Ivanhoe Mines - WACC Analysis

Ivanhoe Mines (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Ivanhoe Mines's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Ivanhoe Mines's investment risk. WACC Formula = Cost of Equity (CAPM) * Common Equity + (Cost of Debt) * Total Debt. The result of this calculation is an essential input for the discounted cash flow (DCF) analysis for Ivanhoe Mines. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Ivanhoe Mines before they make value investing decisions. This WACC analysis is used in Ivanhoe Mines's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Ivanhoe Mines's company valuation.

WACC Analysis Information

1. The WACC (discount rate) calculation for Ivanhoe Mines uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Ivanhoe Mines over the long term. If there are any short-term differences between the industry WACC and Ivanhoe Mines's WACC (discount rate), then Ivanhoe Mines is more likely to revert to the industry WACC (discount rate) over the long term.

2. The WACC calculation uses the higher of Ivanhoe Mines's WACC or the risk free rate, because no investment can have a cost of capital that is better than risk free. This situation may occur if the beta is negative and Ivanhoe Mines uses a significant proportion of equity capital.